Futures Archives - Forex Education

What is the Approximated Yield to Maturity YTM?

So what is Yield to maturity? YTM or yield to maturity, redemption yield or book yield of fixed- interest securities or bonds is basically the theoretical IRR (internal rate of return) that is earned by the investor that buys this bond at present market price today, assuming that all the principal payments and coupons are mode at schedule and is held until the maturity. In examples below, we will calculate only approximated yield to maturity because true YTM is determined once the price matches security’s actual current market price.

Therefore Yield to maturity means the discounted rate wherein the total of all the future cash flows such as principals and coupons from the bond are equal or same as the current rate of this bond. Yield to Maturity is mostly given at the terms of A.P.R (Annual Percentage Rate). It should be noted while doing this often the market convections are followed. For several markets like gilts, the convention is quote annualized yields along with the semi-annual compounding. (For reference check compound interest). See the example below to get an idea.
The annual yield at 10.25% is always quoted as ten percentage, this is because as 1.05% * 1.05% equals to 1.1025 & 2*5 is equals to 10.

Main assumptions

Following are the list of main assumptions that are used concerning convection yield measures:

All the principal payments and coupons are made at the schedule. Bond held till the maturity. Yield to maturity remains always single interest rate which equates the present value of the bond’s cash flows to the price. One common misconception everyone has is the coupons should be reinvested at the yield to maturity. Well this is not true. The actual paper says that this is a common misconception in the financial literature. The fact is coupon reinvestment is absolutely not required to hold the yield to maturity formula. According to Fabozzi, the yield to maturity process tells very little on potential yield which an investment realizes if it is held till maturity. Without making allowance for the tax paid through the investor on return, the yield gets usually quoted, it is hence known as the gross redemption yield. Further, it does not make an allowance for the costs incurred by the seller or purchaser.

The coupon rate versus yield to maturity & parity

When an investor is looking for available options for his bond investment, he will mainly review two types of information. Yes, you got it right; it is the YTM (yield to maturity) and coupon rate. The bonds are mainly fixed-income investments used by investors in savings accounts and retirement account. It’s low-risk security that has a higher rate of returns compared to savings accounts.

Generally, an investor of a bond makes a decision based on the instrument’s YTM rather than the coupon rate.

Here are some bullet points to let you understand the relation between the coupon rate and the YTM.

When the coupon rate of a bond remains lesser than the YTM, this means that the bond is being sold at discount. When the coupon rate of a bond remains greater than the YTM, this means the bond is being sold at premium rate. When the coupon rate of a bond remains the same as the YTM, this means the bond is being sold at par.

Special Considerations

NOTE that the coupon payment for a bond investor is the main source of profit. The YTM calculation incorporates potential losses or gains generated through the changes in market price. The potential loss or gain of the bond trader is generated by the changes in the market price.

When an investor buys a bond at the face value or par value, then the YTM automatically equals the coupon rate. When the investor buys the bond at discount, the YTM gets higher than the coupon rate. When the investor purchases the bond at a premium, then the YTM will be lower than the coupon rate.

Yield to maturity represents the average return of the bond over the bond’s remaining lifetime. A single rate of discount is applied to future payments thereby creating a value that equals the price of the bond. Through this way, time till the maturity, current price, coupon rate & the difference in between the price and the face value will be considered.

Approximate yield to maturity formula

The price of a bond equals to present value of future cash flows. See the formula below:

Here:

P= Bond Price

n- no. of periods

r- the rate of return

C= Coupon payment

t- Maturity period to receive the payment

F- maturity value

(Note: Approximated yield to maturity is because of true value use only real market prices in the calculation. )

By using financial software or calculate, the investor can calculate the percentage rate that can equal the present bond’s cash flow to the selling price of today. To get a brief to let us assume that you are the owner of a company X bond with thousand dollars par value & a coupon of 5%which will mature in 3 years. Now if the company is selling it for nine eighty dollars, using the formula you can calculate that its YTM will be 2.87%.

The variants of YTM

Similar to nature if bonds, which have variant characteristics, YTM too have some variants:

YTC or Yield to call: When the bond can be callable that is repurchased by issuer before its maturity, the market looks to the YTC which is the same calculation as YTM, assuming the bond would be called, therefore cash flow is shortened. YTP or Yield to put: same as the YTC, but here the holder of the bond has an option to sell back the bond to the issuer at a fixed price at a specific date. YTW or Yield to worst: when the bond is exchangeable, puttable or callable or have other types of features, YTW is considered as the lowest yield of YTM, YTP, YTC & others.

Bonds with coupon-bearing

For multiple coupon bonds, generally, it’s not possible for you to solve the yield algebraically on the basis of price. Newton’s method, a certified numerical technique of root-finding is used to calculate the approximate yield. This explains that the future cash flow of today is equal to its bond price.

What is the importance of Yield to maturity?

Yield to maturity enables potential investors to understand and compare between variants securities and returns to be expected from each of them. This further helps them to determine which securities they can consider for their portfolios. Also, it is important for investors to gets some knowledge on how changing market conditions can affect them, this is because when there is a drop-in security price, the yield rises.

Yield to Maturity vs. Coupon Rate: What’s the Difference?

Many investors prefer to invest in bonds which are fixed income securities since they are a low-risk option for the investor, with little risk of default. The interest rate offered on bonds is usually slightly higher than the interest on the savings account though the interest rate for a specific bond will vary depending on the company issuing the bond. Since most bonds are low risk, they are preferred by retired people and others who do not wish to take risks. While choosing between the different bonds they would like to find out Yield to Maturity vs. Coupon Rate: What’s the Difference?

Coupon rate

When a company or the government issues a bond, it will usually specify the interest that the bond issuer will pay the investor. The interest may be paid annually, monthly, quarterly or every six months based on the bond terms. The coupon rate is the interest rate for the bond calculated annually by dividing the total interest with the amount which is invested. The coupon rate is linked to the market interest rate for debt. Most companies will issue bonds at par and specify the coupon rate. However, some companies may issue bonds with zero-coupon rate, at a discount to their face value

Yield-to-Maturity

The yield of a bond to maturity, abbreviate as YTM is the total profit which the investor in the bond will make till the maturity date. In addition to the income which the bond will pay periodically as specified by the bond issuer, the investor in the bonds can also make some additional profit by trading in bonds. The face or par value of bonds will vary depending on the market conditions. If the interest rates of the bond are higher, the bond value will increase and the bond value will decrease if the market interest rates are higher than the bond interest rates. In some cases, the bond issuer will also issue the bonds at a discount to their face value.

Comparison

Usually, the Coupon rate is applicable for both retail investors and bond traders since both will get paid interest periodically for their investment. However, bond traders who invest large amounts are interested in maximizing their profit, so they will maximize the YTM of the bond. Depending on the market value of the bonds, they may sell or purchase bonds to maximize their YTM. If the investor purchases the bond at its face value and does not trade in it, the YTM is equal to the coupon rate. Another option for the investor to increase the YTM is by purchasing the bonds at a discount to the face value.

Yield

If the investor purchases the bonds at a price that is less than the face value, the YTM will be more than the coupon rate for the bond. Some companies which are finding it difficult to raise funds may issue the bonds at a discount. In some cases, the bonds may also be purchased at a discount in the bond trading market. In other cases, the investor or trader may purchase the bonds at a premium to the face value. In this case, the YTM for the investor may be less than the coupon rate for the bond.

Ten Bagger Meaning

by Fxigor

A “ten bagger” is a term used by investors to describe an investment that is exited at 10 times the initial investment is common among investors and is referred for describing a particular investment through which the investor can realize returns measuring ten times of the investment amount or in other words we can say that it generates a return on investment (ROI) of 1000%.

The term 10 Bagger got more used after its common use from Peter Lynch, the renowned Wall Street investor. He burrowed the term from baseball in which all extra hits get referred to baggers.

Ten baggers are mainly used for describing stocks growing tenfold within a provided time frame. An investor, who benefits through a 10 bagger, typically is for long term.

Ten Bagger in Detail

Most investors dealing in private equities typically go for at least a return of three times on investment, commonly known as the three bagger. A refined metric for measuring returns would be internal return on investment (IRR). A IRR of 25% would hold typical minimum threshold for PE investor, to around three bagger for five years’ time period.

Therefore when an investment of equities worth $10 million gets done, the investor has to realize around $30 million post a time period of five years for realizing three bagger.

Typically investors in venture capital would look for around 7 to 10 bagger deals as they generally invest less established, high risk start-ups requiring returns that are significantly high.

Key Points

Ten bagger is a term put up by famous investor Peter Lynch for returns that are ten times their first purchase price.Ten bagger begins as stock with growth of strong earnings but it is still tradable with profitable valuations. Deep industry knowledge is necessary. Developing industries fruit in more ten baggers compared to established ones.

Ten bagger Key Attributes

While looking for a prospective ten bagger investment, a few attributes must be considered by any investor.

Novel Technology: The high risk stock market is mainly technology driven. Early investors that leaded hi-tech companies realized great amounts. However, all kinds of technologies don’t fit in. New Products: Similar to latest technologies, companies having new products fitting in mega-trends get better change at becoming ten baggers. Investors must look out for novel products filling requirement that companies create in addition to production and marketing. Sovereign Action: Governmental and Sovereign action would bear a great effect on prices of stocks. New laws and regulations lead to creation and downfall of markets and its trends as well. Thus, prospective ten bagger must be supported or else should not get impended by regulatory authorities. Societal Mega-Trends: Following closely with societal megatrends would be among key elements considered by ten bagger stocks. More shifting towards novel technologies bring in more prospective investors. Investor interest: A lot of people think that it would be great to find out stocks that are less commonly known. People might think of finding quality gem, but it wouldn’t be a great indicator for finding prospective ten bagger.

Although these ten baggers would seem like fine goals for prospective investors to select, the most vital advice provided by Peter Lynch to investors would be to make investments in known stocks. Make sure to do all the research work beforehand and invest for long run. With even such consistent effort, there is no guarantee of bagging on a ten, but you’ll certainly be a lot of better compared to others.

How to Invest in Mexican Stocks

by Fxigor

How to Invest in Mexico Stocks MArkets ?

Are you eager to discover the best way to invest in Mexican stocks? Well, the Mexican manufacturing sector is growing rapidly which is expected to benefit people in all dimensions. Mexican stocks are also appearing in US exchange rates which implies there is positive free trade. That is why you will get to benefit by trading with Mexican stocks through diversity in your portfolio and consequent growth. I will later highlight some of the best broker options that will allow you to trade with foreign stocks. So let’s get into it.

If you want to start to trade Mexican indices you need to know everything about this two opportunities :
The best indices for ETFs on Mexico are MSCI Mexico and MSCI Mexico Capped (on this links you can see full pdf report for this indices).

What is Mexican stocks Exchange

Mexican stocks Exchange has various descriptions which include Mexican Bolsa, BMV, BIVA. This stock exchange can be equated to that of the New York Stock Exchange because they have relatively similar functions. The BMV is currently rated as the second-largest stock exchange in Latin America based on Market capitalization.

This exchange largely deals with fixed income, products, derivatives, and cash equities. You will realize that there are similarities of Mexican stocks Exchange when you are trading with the United States stock exchange in terms of the regulation of exchanges and the available options. Most Mexican stocks trade in the US because of a close relationship between the two Nations.

Therefore when you keenly analyze the IPC index charts you will get to have some insights on why you need to invest in Mexican stocks Exchange by investing in a specific company because of growth in the manufacturing sector. An authorized online stock broker can greatly help you to make the best out of the Mexican stock exchange.

Mexico Stocks Market	Components	Capital
AMXL	América Móvil	54B
GMEXICOB	Grupo México	23B
GFNORTEO	Banorte	20.4B
AC*	Arca Continental	11.1B
GFINBURO	Inbursa	10.5B
SANMEXB	Santander México	10.4B
BIMBOA	Grupo Bimbo	10B
GCARSOA1	Grupo Carso	7.58B
IENOVA*	IEnova	7.4B
ALFAA	Alfa	6.36B
ASURB	Grupo Aeroportuario del Sureste	6B
GAPB	Grupo Aeroportuario del Pacifico	5.85B
GRUMAB	GRUMA	5.39B
PINFRA*	Pinfra	4.36B
ALPEKA	Alpek	3.34B
KIMBERA	Kimberly-Clark de México	2.82B
LALAB	Grupo Lala	2.78B
ICHB	Industrias CH	1.69B
GENTERA*	Gentera	1.6B
BOLSAA	Bolsa Mexicana de Valores	1.23B
LABB	Genomma Lab Internacional	926M

Pros And Cons Of Buying Mexican Stocks

The most intuitive aspect of purchasing Mexican stocks is that it will open opportunities for faster growth that you would have had with the US companies. However, let us have a look at some of the advantages and the disadvantages that comes along with investing in Mexican stick exchange.

Pros

-There are risks associated with investing in a single country or a particular sector. That is why when you Invest with Mexican stocks you will be exposed go diversification which reduces the risks.

-Mexican stocks can actively compete with larger economies because of the United States -Mexico -Canada agreement which has been a substantial economic boost.

-Low energy and labor cost offer an opportunity for faster growth which should be a lead as to why you should back on the Mexican stocks.

Cons

-Mexican stock Exchange is still an emerging market that is susceptible to currency risk. The value of the currency will be reduced because the trade is done in pesos then converted to US dollars will have reduced value.

-Economic growth in emerging markets is not steady hence the Mexican economy is not an exception. This is because earlier this year there was a negative despite the GDP has shown some steady improvements.

-Liquidity risks are common disadvantages witnessed even in US stock markets. Therefore Smaller markets like the Mexican will experience severe effects because the seller might not find buyers who are legible for the quoted price.

-Political risks can also contribute to a decrease in the stock exchange markets.

How to buy Mexican Stocks

An exchange-traded fund is an ideal way of investing in Mexico alongside other avenues. However, the returns might not meet your expectations because you will require a broker to invest through a particular company. The following are ways on how you can purchase Mexican stocks.

Determine The Stocks You Want to Purchase

How will you determine the sticks that you need to buy? Well, you might need to filter Mexican companies based on your investment goals using a stock screener. This might include aspects such as growth trend, payments of dividends and those companies that are under a particular sector.

Identify a Broker

If you want to invest in Mexico you will need to strike a partnership with a broker who is legible to execute a trade on Mexican stock exchange. For a case of such emerging markets, I would advise you to go for an interactive broker because they have a full-featured trading platform with over 100 trading markets. I suggest Hotforex MT5 platform for trading stocks.

Practice Trading in Mexican Stock Market

Before you start trading you should build your portfolio, come up with a strategy and test your picks against IPC. Therefore identify an online platform where you will use a demo account to practice without using real money.

Start Trading

Once you are a set to trade find your account. You should also most brokers will require a minimum investment amount. Dollar-cost averaging will help you build a position without laying too much emphasis on the most coveted stocks. Additionally, periodic deposits are ideal if you are a buy and hold investor. You also need to strike a balance when you begin trading. You can consider using more amount of money to undertake less frequent trades so that you are not disadvantaged with the commissions that are usually demanded by the brokers.

Mexican Companies To watch

Walmex seems to be doing well because its share prices have gradually increased in the past four years and that is why it has been ranked the largest Walmart outside the US.

Additionally, Cemex which the biggest cement company in North America is also a company to watch. If you are a proactive investor you can take further insights into this company. Therefore, the companies that seem to have stabilized can be very rewarding to the investors.

Getting Started To Buy Mexican Stock

Before you start investing take time and learn the trading dynamics because so that you can know what works best for you. Improve your trading skills and keep track of your picks. You can greatly benefit From Mexico’s growing economy if you take your time to choose the most appropriate companies to keep an eye on.

Bloomberg Terminal Free Alternative

by Fxigor

Bloomberg Terminal Alternative

Bloomberg Terminal has been a popular investment platform for many years now. But traders might be on the lookout for something new. There are good reasons to search for a Bloomberg substitute. The cost for a seat at the Bloomberg Terminal might be upwards of $20,000 to $25,000 per year. That has a lot of traders looking for something new on the market. Fortunately, there are great options that people can choose going forward. The right Bloomberg substitute is a matter of much debate among traders today. They have some good options and the choices will be made clear too.

Some Examples Of Bloomberg substitute:

Koyfin The ultimate free investing platform for financial data and analytics

Koyfin is a growing platform that many are opting to use. The website is easy to access and provides real time updates on stocks. New members are introduced to trading with plenty of information. Look for the impressive graphs and other figures that will dictate how trades are done today. New investors will be brought up to speed about Koyfin and how it will work. The program is designed by top experts and will appeal to most everyone. Even seasoned traders will find something that they enjoy about Koyfin. That explains the growing popularity of the trading network as it stands now.

>Yewno
Yewno has a platform called Edge and it will not disappoint. The features are going to impress many new traders waiting for their chance.

Yewno Finance leverages Yewno’s proprietary Knowledge Graph to find hidden relationships and hidden investment opportunities to allow investors to be ahead of the market.

It is open to most new traders and will simplify the trading process for many people. Think about the advantages introduced by Edge and what it can do for members. Membership is granted to new people who sign up through the program. Access to information is readily available and people have praised the details. Often times, the platform will be judged by the programs that it will extend to new members over time.

Information To Consider:

There is a lot of info to weigh on the open market. A good trading platform should simplify the trading process for all people. New members might feel overwhelmed by what they see at first. But there are other options to consider as the trades get underway. Be prepared for an incredible amount of information that needs to be condensed. Often times, the trading platform will do most of the work for people interested. The right Bloomberg substitute will simplify trading and help new members find their space. The information can be discussed and reviewed whenever it is needed too.

Real time news feeds are becoming a popular feature. Any good Bloomberg substitute will offer news to their members. Stay abreast of the rising news stories on the market as it stands today. The market wants to extend some help to anyone new to the trading. The platform should showcase the top market news stories of the day. That will tell people what moves to make as the trading gets underway. The Bloomberg substitute should showcase the news in a readable format. Outbound links are acceptable and could connect people to some incredible outlets along the way.

Make Use Out Of Data:

Smart traders know that data will be critical for their needs. The data analysis tools with these platforms are highly touted. Graphs and charts will showcase the best Bloomberg substitute on the market. That gives traders time to analyze the data on their own time. Worldwide data is important and could showcase what is happening in foreign markets. The smart trader will know what is going on in these foreign markets. They can also share data with their friends and get some opinions that really inform future decision making processes.

Data analysis can also be done by the experts. Rely on expert opinions about the day’s trading as it takes place. A good trading platform will help new traders understand the data analysis tools. The experts are there to help and want to make a statement as well. Become well versed in the top rated tools now out on the market today. The data analysis has wowed people with what can be showcased. The experts provide a new opinion that many will consider each day. Take tips from the pros and become a veteran trader in no time flat.

Other Features To Consider:

A chat tool is a great option to include with the platform. The trading platform should make the experience easier for new members. Feel free to chat with friends and share some secrets along the way. That is bolstering the reputation of the trading platforms on the market. New platforms want to make a name for themselves in some way. The chat tool is a good selling point and appeals to a younger crowd. Think about the chat tool and how it can be tried out in the right context.

Remember to read through the available reviews for a platform. People want to get opinions before they commit to a new platform. That helps people make smart choices related to their investment strategy. Other investors have given the platform a try before now. The considerations are there for new traders to follow before they commit to a platform. There are goals that everyone will want to evaluate in short order as well. Write new reviews and join the debate about the merits of the bloomberg substitute. It could make all the difference in the long run for new members.

The cost of the this kind of platform will be a big factor ! This Bloomberg terminal competitors are free ! Some people have a limited budget and that informs their decision making processes. The traders will be willing to place a trade with a new platform. They want to maximize their profits and avoid some of the costly membership fees. Platforms will actually advertise the services that they can extend to people. They will mention whether the service is free or if a membership fee might apply to the website itself.Enjoy in free stock terminal !

Google Stock History. When will google shares split ?

by Fxigor

History of Google in the stock market

Google is one of the biggest company on the world. Let we start from the basic : What is the stock ticker symbol for google ? Google stock ticker symbol is GOOGL.

The internet search engine Google had its Initial Public Offering (abbreviated as IPO) more than 15 years ago on August 19, 2004. At the time of the IPO, a share of google was available for purchase for $85. At present the price of these google shares, with symbol GOOGL, company Alphabet is more than $1300, resulting in a profit of more than 1000% for the initial investors in the stock

The history of Google in the stock market

For stock market investors, the google stock market history is as follows

– Google had its IPO on August 19,2004, and 19,605,052 shares were sold in the IPO.

– Later a two-for-one share split was announced to create a new categories of shares without non-voting rights

– On second October 2015, Alphabet Inc, the umbrella company of Google was started, to include different side projects which are not directly part of Google

– Investors can invest in GOOGL shares using the top online brokers recommended for stock traders with limited experience

When did Google begin listing in the stock market

Alphabet Inc was earlier known as Google. The company initially sold 19,605,052 shares on August 19,2004 as part of its IPO. A year later Google sold an additional 14,25,265 shares on August 18,2005. In June 2005, the valuation of Google was approximately $52 billion. After the second lot of Google shares were sold on August 18,2005, the cash reserves of Google doubled to $7 billion. In 2017, the net sales of Alphabet was over $90 billion, its profit $19.4 billion. This was significantly higher than the sales of $968.1 million and net income of $105.6 million in the year 2003.

When will google shares split ?
History of stock split by Google

Just before Facebook announced its IPO in 2014, Google announced its stock split which led to some controversy. The company announced the stock split since it wanted to create a new category of non-voting shares. In this two-for-one stock split, the Google shareholders received one more additional share without any voting rights for every share of the Google stock which they owned. Experts claim that the stock split was announced mainly because of the IPO of Facebook, another large internet company. Experts claim that Google used the stock split to inform investors that they continue to be the leading tech stock in the world.

History :
GOOGL 3 April 2014 had split ratio 1998/1000 and price before split was $1135.10 ; price after split was $567.55.
GOOG 27 April 2015 and split ratio was 2.7455/ 1000.

Larry Page has voting power 26.1% ; Sergey Brin has 25.2% voting power.

Alphabet stock

The founder of google Larry Page, claimed that the new products being developed are likely to be used extensively. Hence they would generate new sources of revenues for Google and its partners, just like search is the major source of income for Google at present. Larry Page has big dreams for google, hence he converted Google into a larger company Alphabet Inc. The detailed note from Larry Page describes how Google has grown as a company. He also described how Google would begin a new phase in its history, become a company which is controlled by a holding company Alphabet.

The formation of the parent company Alphabet was fairly simple. Google had a large number of side projects like driver-less cars, contact lenses for sensing glucose levels, anti-ageing , longevity products, which were hundreds in number. As part of the restructuring of Google announced in October 2015, all these projects were split into separate companies which are different from Google. Alphabet is now the parent company for all these different smaller companies. Though there is a lot of information on these smaller companies online, a simple way is to list the names of the companies

A list of the business units of Alphabet is provided below

Calico : This unit specializes in biotech related research, development. It is involved in studying the lifespan of humans, and also developing anti-aging products

GV : Google ventures, the venture capital unit of Google

CapitalG : This is a growth equity fund which invests in companies worldwide. CapitalG focuses on companies which use technology uniquely and are planning futuristic products and services.

Verily: Is the research unit of Alphabet, mainly focusing on life science related studies

Waymo: is an independent automotive development company specializing in self-driving cars

Nest Labs: A company focusing on home automation

X: A research & development company which tries to find solutions to most difficult problems in the IT, computer science and associated fields

Sidewalk labs: A company which focuses on designing and building innovations for urban areas, to help the large cities overcome their many problems

Fiber : Provides high speed internet over a broadband connection

Google : the main internet company, google continues to exist, though some of features/options like Google+ have been closed since they were not very popular online . At present google includes search, ads, Android, apps, maps and YouTube

Should an investor purchase GOOGL stock

After reading the history, many stock investors would like to find out whether it is worth investing in Alphabet at present. Some investors are hoping that Alphabet will offer a stock split, since the stock prices will fall after the split is announced. This will make the shares more affordable for the investors, especially those with a limited budget. However most stock market experts who are monitoring Alphabet closely, claim that it is extremely unlikely that the company will announce any kind of stock split for many years.

In 2017, the Alphabet stock price rose to their highest levels ever. In the previous year, the share prices increased by over thirty percent. Hence Alphabet shares are expensive. With shares priced at more than $1000 each , it is difficult for a majority of the small investors to even think of purchasing a few shares of GOOGL. Alphabet remains a highly diversified company, investing in a large variety of futuristic technologies which include broadband cable, driver-less cars and research in the life sciences. Hence the company has a large number of opportunities available to it. The company has a leadership team which dreams big and has massive plans for growth. All this makes Google one of the best stocks for investors in the stock market. However the investors should be able to afford the high GOOGL prices.

Koyfin The ultimate free investing platform for financial data and analytics

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